MGM Resorts Buys Hard Rock Operations in Ohio
MGM Resorts has acquired the operations of the Hard Rock Rocksino Northfield Park, opening the Ohio market to one of the fastest growing casino developers in the country.
The racino, which has 700 employees, is located 17 miles from Cleveland. MGM purchased the operations for $275 million with escrow expected to close in the second quarter of 2019. The casino will be added to an existing lease between MGM Resorts and its REIT MGM Growth Properties (MGP). MGM Resorts owns 70 percent of MGM Growth Properties. MGP bought the property in July for $1.02 billion. MGM will pay $60 million annual rent to MGP.
During the last month the Rocksino reported $293 million in net revenues and it has led the Ohio market for 35 of the last 39 months.
Despite the obvious link between MGM and MGP, the sale was a surprise to some. MGP had been negotiating with Hard Rock International to retain the operations and many thought the property would remain under the control of Hard Rock. The Rocksino quickly—and somewhat surprisingly—became the market leader in the Ohio gaming market despite the fact that it offers only VLTs and no table games.
MGM CEO and Chairman James Murren commented, “We believe the Rocksino is a great fit for the MGM portfolio and will benefit from our capabilities as a leading global entertainment company and our award-winning M life Rewards Program. We anticipate revenue and profit growth from this combination.”
Murren added, “We are pleased to welcome the Hard Rock Rocksino and more than 700 employees to the MGM Resorts family and look forward to working with them during this transition. Since opening its doors in 2013, the Rocksino has cemented itself as the market leader in gaming and entertainment due to its superior asset quality, premium location and dedicated employees. We believe the Rocksino is a great fit for the MGM portfolio and will benefit from our capabilities as a leading global entertainment company and our award-winning M life Rewards Program. We anticipate revenue and profit growth from this combination.”
MGM has properties in Nevada, Massachusetts, New Jersey, Michigan, Mississippi, New York and Maryland, with 11 properties owned by the MGM Growth REIT.
Ohio has four casino resorts in its largest cities and seven racinos in the Buckeye state’s racetracks. Hard Rock Rocksino is on 110 acres and includes a 200,000 square foot casino and the Northfield Park harness racetrack.
The casino has 2,300 video lottery terminals, retail shopping and some dining. It also hosts a 1,900-seat music area and 250-seat event venue.
The purchase opens MGM to a new market that would have the ability to take advantage of sports betting should Ohio eventually legalize that.
Dan D’Arrigo, MGM’s chief financial officer, pointed out, “The Rocksino’s attractive location, market leadership, and superior non-gaming offerings complement our portfolio of quality destinations, and we believe there are significant opportunities for MGM Resorts to further drive growth through our customer loyalty program and our operating expertise and scale.”
He added that the acquisition would “enhance our free cash flow generation.”